Here’s a bullish indicator for ThinkorSwim, inspired by a lead strategist at JPMorgan Chase & Co.
The VIX (Cboe Volatility Index) is a widely-followed measure of stock market volatility.
JPMorgan strategists, led by Mislav Matejka, have developed an indicator based on the VIX that could be used to trade the markets more effectively. 1
The concept is simple:
That said, we can create an indicator for ThinkorSwim based on that condition.
VIX Buy Signal Indicator for ThinkorSwim
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# Indicator Name: JPMorgan’s VIX Buy Signal
# Description: A bullish indicator from JPMorgan strategists
# Version: 1.0.0
# Developer: Melvin C.
# URL: https://thinkscript101.com/vix-buy-signal-indicator-for-thinkorswim/
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declare lower;
def vix_data = close("VIX");
plot vix_average = (vix_data / average(vix_data, 30));
plot signal_line = 1.5;
vix_average.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
The VIX Buy Signal indicator has been triggered more than 21 times during the past 30 years.
Every single time, the S&P 500 Index increased by an average of 9% over the ensuing six months.
The indicator has demonstrated a 100% accuracy rate outside of recessions.
Usage
- Set your ThinkorSwim chart to the Daily timeframe.
- Use it on the S&P 500 Index (example: SPY or VOO).
- Trade type: Bullish, upside potentials.
Under the Hood
As part of the learning process, I will post some important functions and code that was used during the creation of the indicator.
If you’re curious about how the indicator is created, see the part below.
close("VIX"): Use this method if you want to pull price data from another ticker.
(vix_data / average(vix_data, 30)): The current price of the VIX is divided by the average price of the VIX from the last 30 days.
SetPaintingStrategy: Controls how a line is painted. From the example above, we used HISTOGRAM style type.
Happy trading!
Reference:
1. https://www.bloomberg.com/news/articles/2022-02-08/jpmorgan-strategists-see-sure-fire-sign-it-s-time-to-buy-stocks
is it possible to script this on intraday for SPX and other tickers? thanks
I’m afraid not.